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Is an auditor's propensity to issue going concern opinions a valid measure of audit quality?
journal contribution
posted on 2023-05-20, 12:13 authored by Guo, Y, Delaney, D, Ahmed, AA number of previous studies use auditor propensity to issue a going concern opinion (GCO) as a proxy of audit quality when examining a sample of financially distressed firms. This study examines whether audit quality (measured by discretionary accruals) influences the probability of financially distressed firms receiving GCOs using a non‐specific sample of 2937 firm‐year observations from Australia over the period 2011–2015. The study first investigates the association between financially distressed firms and the issuance of GCOs. This association is then re‐tested after separating the total sample into low and high audit quality subsamples. The results indicate that financially distressed firms are more likely to receive GCOs, confirming the application of ASA 570 Going Concern. However, financially distressed firms that receive GCOs from their auditors are limited to firms that have higher‐quality audits.
History
Publication title
Australian Accounting ReviewVolume
93Issue
30Pagination
144-153ISSN
1035-6908Department/School
TSBEPublisher
Wiley-Blackwell Publishing AsiaPlace of publication
AustraliaRights statement
Copyright © 2020 John Wiley & SonsRepository Status
- Restricted